Not all innovation efforts pay off equally. Which type of development projects to pursue? Which offer most value to your clients and the highest return on investment for the organization?
A portfolio of activities
To build a sustainable portfolio of innovation activities, it helps to foster various types of initiatives with different risk profiles and opportunities for a return on investment 1,2. Quality improvement and research are among the innovation activities that most professional service firms already undertake. However, new revenue stream generating efforts fall outside these domains. The activities that are missing – new service and new business development efforts – are most rewarding when it comes to generating value for clients and new revenue streams for the professional service organization.
The figure above shows the entire spectrum of innovation efforts 2.
From improvements, minor changes in the process used to deliver the service such as optimizations, to totally new services and ways to deliver these that are the results of basic research. The best opportunities, in terms of revenue generation and creating a return on investment are those in the circle. That is, opportunities beyond quality improvement and short of basic research.
The covered spectrum, that is enhancements, next generation services, and radical breakthroughs, are the opportunities that deliver most value, because they require changes in multiple areas (technology, finance, business model, operations etc). They are far less risky than research projects, because the technologies have already been proven in practice, while offering a much larger bang for the buck than improvement projects.
Beyond quality improvement
The lower left area in the graph is the area of Quality Improvement. Relatively minor initiatives that can be implemented without requiring significant investment or approvals. Such as for example changing the intake protocol or changing the order of a workflow. Although these minor changes can be very beneficial to the customer experience, the impact is often minor because they typically don’t result in new revenue streams. Perhaps because they are most often managed in the purview of ongoing operations.
That does not mean that quality improvement is not important. No organization can actually do without. The point I am making, that an organization should do more than improving their current services only. They should also invest in exploring new opportunities.
Short of basic research
On the other end of the spectrum you will find basic research activities. Again, important to professional service organizations, as they enhance the reputation of the organization in the profession. There is a reason why most professional service providers’ academic experience included basic research. However, such research rarely results in new revenue streams either. Especially not in the short run. The aim of this work is scientific advancement. Scientific publications are the result, not new services. Again, important for the profession, but not the only type of innovation activities to pursue when it comes to exploring new opportunities and generating new revenue streams.
Missing in action
From a portfolio perspective, enhancements, next generation and radical breakthrough projects should cover a significant portion of your innovation efforts (about 40%-60% depending on your strategy 1).
Oddly enough, very few professional service firms engage in these new service and new business development activities.
As an innovation manager of an engineering firm recently shared with me. We are really good at executing what the client asks. We are also really good at improving our services over time. Our quality department makes sure that we review each project and are always on the outlook for ways to do things better. Our firm has a fund to support research projects executed by our engineers. Each year we hand out rewards for those who have gotten their research published. Yet, when it comes to innovation, we seem to be lacking all of this. No process, no funding, no rewards. Yet, it are our innovation projects that make a true difference. Of all the initiatives, these are the projects that impact the lives of our clients, the lives of our employees, and in the profitability of our firm.
Just like the example above, in most firms, someone with an innovative idea on how to generate a new revenue stream has to run it “up the management chain”. An unclear and ambiguous process, which requires lots of stamina and meetings to get approval to move forward. And even when funding is made available, the path forward is unclear and has many unnecessary hurdles. While time is the scarcest resource in professional service organizations and being able to act swiftly a prerequisite for innovation. Hence, no wonder that new revenue streams generating opportunities are neglected. It has to be worthwhile to set aside time and focus on what is next. Generating new revenue streams takes time and resources. In sum, it requires a structured approach to go after these opportunities. Without structure, the chance of success are too slim.
It does not have to be that way. We have demonstrated, that with a 3 to 4 hour time commitment, professionals can develop a business case and their testable concept for these types of new business and new services in just 6 weeks.
That does not mean that all initiatives started will be a success. Instead, by using our structured approach, we will help your organization to quickly figure out which projects are worth pursuing and have the highest chance of success. For the projects that make it through the process, success is guaranteed.
We gladly assist your professionals in their journeys to create high value new revenue generating services that your clients will love. Along the way, we will also provide you the building blocks that enable you as an organization to engage in new business development capabilities in a sustainable manner. That is, we will structure your new service and business development process in such a way, that the best ideas get implemented, while taking the least amount of time from the busy professionals, and using the available resources to transform the most promising ideas into reality.